Kind of a funny story. When I first started developing my Japanese horror setting for the Pathfinder Roleplaying Game, Kaidan. I was initially developing it for the CWBP (Community World Building Project) here in this forum. I had initially called my island chain, the empire of Asahi - since Asahi is Japanese for 'risng sun'. The problem is, that most people who don't speak Japanese, only know of the word Asahi, as a particular brand of Japanese beer. Not that I was afraid any kind of copyright issue, as Asahi is just a word and not a made-up product name, but I really didn't want to associate my game setting with alcohol...
So I started researching more deeply. Interestingly, I learned there was a Japanese story telling game played by samurai in the 15th century, called Hyakumonogatari Kaidan Kai - which means a collection of 100 ghost stories, with Kaidan meaning "ghost stories". The way the game is played, 100 lit candles are placed in a circle on the floor. All the participants sit inside the circle, while being watched by an audience outside the circle. Each participant tells a short ghost story, odd occurence or creepy tale and at completion wets his fingers and extinguishes a candle. Since there were usually only a half dozen or so participants, each had to tell a couple dozen tales each. Once all the candles are extinguished, it was believed that the story telliing and candle extinguishing was some sort of arcane ritual that summoned a demon to visit the players. The game was a test of courage played among samurai, although being very popular the game spread throughout society and lasted up until the arrival of Americans and the end of Shogunate Japan.
Since my intended setting was both feudal Japan based, and Asian horror, choosing Kaidan as its name seemed appropriate. More than that, however, naming a Japanese flavored story telling game, using the same name as a Japanese story-telling game that is hundreds of years old seemed too good to pass up. As kind of a reincarnation of an ancient Japanese game. Notably a twisted form of reincarnation is one of the built in mechanics of the setting - so Kaidan is almost custom designed to be the perfect solution.
For the rest of my setting, I've tried to both stay true to using the Japanese language, and trying not to duplicate any actual Japanese city or place name - I didn't want to infer any connection between my fiction and anywhere in actual Japan. So all city names, place names, provinces use actual Japanese words. Even the people (NPCs of the setting) use actual Japanese last names, but I have again tried to avoid using the whole names of known Japanese historical figures or modern celebrities. On the other hand of the setting's fictional founding is based on an actual historical event that occured on April 15, 1185 - the final battle of the Genpei War in Japan. The tale of the last battle and the suicide of an entire imperial house as a result of that event was the causing curse that creates Kaidan. While Kaidan is based on Japanese history (at least this particular point), it is a fictional place that otherwise has no direct connection to Japan.
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